Suncorp warns of $500m asset value writedown

Financial group Suncorp has written down the value of its life insurance business by $500 million.

The company says it has written down the 'goodwill' and other 'intangible assets' associated with the business by around $350 million, while adjustments to its reserves and loss recognition on some products resulted in a further writedown of approximately $150 million.

Suncorp's chief executive Patrick Snowball says the write-downs reflect problems in the life insurance sector, and the new assumptions behind the writedowns are forward-looking rather than based on historical averages.

"The structural and cyclical life insurance issues have now been recognised by most life insurance companies and reinsurers, however, however, we are frustrated that industry change is not occurring at a more rapid pace," he said in a statement.

"This is continuing to impact Suncorp Life earnings and the potential for further deterioration needs to be reflected in our assumptions."

Excluding the non-cash write-downs, which affect the accounting value of some assets, the company is expecting its life insurance business to post an underlying profit of between $75-85 million this financial year.

While the outlook is challenging for life insurance, Suncorp says relatively benign weather has so far kept general insurance claims around $25 million below expectations.

However, drought conditions, particularly in north-west Queensland, have resulted in an increase in loan loss provisions, and the bank's holdings of impaired assets rose to $485 million.

Credit growth also remained subdued, with Suncorp increasing lending by 1.1 per cent over the March quarter, roughly in line with its competitors.

Suncorp Bank's boss John Nesbitt says, while loan growth was subdued, the bank is concentrating on safer lending.

"We have been particularly focused on the sub-80 per cent loan-to-value ratio (LVR) housing market through both our branch and broker distribution networks," he said.

The bank also said it had a significant improvement in its net interest margin - the difference between the interest rates it pays to borrow money and what it lends it out at - to somewhere between 1.75-1.85 per cent.